System and Method for Using Order Modifiers in Relation to Trading Strategies

ABSTRACT

A quantity modifier and a price modifier are provided for a spread trading strategy having a desired spread price and a desired spread quantity. According to an example embodiment, a quantity modifier divides the desired spread quantity into a plurality of disclosed spread quantities. Once the disclosed quantities are determined, a plurality of disclosed spread orders having the disclosed spread quantities are sequentially submitted to the market until the full desired spread order quantity is executed or until a predefined condition is detected. A price modifier determines a price level for each disclosed spread quantity, such that each disclosed spread order may be submitted at a different price level.

CROSS-REFERENCE TO RELATED APPLICATIONS

The present application is a continuation of U.S. patent applicationSer. No. 12/570,816 filed Sep. 30, 2009, and entitled “SYSTEM AND METHODFOR USING ORDER MODIFIERS IN RELATION TO TRADING STRATEGIES,” thecontents of which are fully incorporated herein by reference for allpurposes.

BACKGROUND

The present invention is directed towards electronic trading systems.More particularly, certain embodiments of the present invention aredirected towards using order modifiers for trading strategies, such asspreads, in electronic trading systems.

An electronic trading system provides for electronically matching ordersto buy and sell items to be traded. The items may include, for example,stocks, options, and commodities. Typically, an electronic exchange inthe electronic trading system is used to match the orders. In addition,the electronic exchange provides market data to various client devicesin the electronic trading system used by traders to place the orders.For example, the electronic exchange may provide market data such asprices for various items available for trading and trade confirmationsindicating what trades have occurred at what quantities and/or prices.

In addition to trading single items, a trader may trade more than oneitem according to a trading strategy. One common trading strategy is aspread, and trading according to a spread trading strategy may also bereferred to as spread trading. Spread trading may attempt to capitalizeon changes or movements in the relationships between the items in thetrading strategy, for example.

A trading strategy may define a relationship between two or more itemsto be traded, as well as a desired price at which to buy or sell thetrading strategy. Each item in a trading strategy may be referred to asa leg of the trading strategy. Then, an automated trading tool, forexample, attempts to achieve the desired price by buying and selling thelegs at appropriate prices. The leg for which the order is placed isreferred to as the quoting leg. The other leg is referred to as a leanleg and/or a hedge leg. The price that the quoting leg is quoted at isbased on a price (often an inside market price) that an order could befilled at in the hedge leg. The price of the hedge leg is also known asthe lean price (also referred to as a leaned on price). As the leanprice changes, the quoting price may also change to achieve a desiredspread price.

Traders often define multiple trading strategies, such as spreads, atdifferent desired prices to achieve a certain average desired price. Todo that, at least one leg order is quoted (depending on the tradingstrategy configuration) for each trading strategy, thus, resulting inmultiple orders working in the market at the same time. Such aconfiguration requires a lot of processing power by an automated tradingtool, because to achieve the desired price for each trading strategy,the quoting order corresponding to each respective trading strategy mayhave to be re-quoted when the lean price changes. Additionally, whenplacing so many orders to achieve a desired average price, the existingrisk management systems typically allocate enough risk to cover allorders that are quoted and all possible hedge orders. In such a system,a trader may quickly exceed his risk limits. Because a significant riskposition is taken up by the orders being quoted in relation to eachtrading strategy, the risk system may prevent a trader from sendingadditional orders or executing other trading strategies.

Additionally, if a trader places a spread order with all spread legsbeing quoted, the trader risks all quoted leg orders getting filled atthe same time, thus creating undesirable spread fills. For example, if atrader places a 10-lot spread order having two legs, with both legsbeing quoted, it is possible for the trader to actually get 20 spreadfills if the two quoted leg orders get filled at the same time. Thenumber of undesirable spread fills increases as the quantity quoted forthe spread and/or the number of legs increases.

It is therefore desirable for electronic trading systems to offer toolsthat can assist a trader in adapting his or her trading strategy to anelectronic marketplace, help the trader make trades at desirable prices,while making sure that enough risk balance exists to execute desiredtrading strategies.

SUMMARY

Various embodiments that are described herein include systems andmethods for trading a spread trading strategy in an electronic tradingenvironment. According to an example embodiment, a spread is defined ata computing device to send a spread order to an electronic exchange. Thedefined spread includes a desired spread quantity, a desired spreadprice, a quantity modifier, and a price modifier, among otherparameters. Two or more disclosed spread orders may be determined usingthe quantity modifier and the price modifier. More specifically, thequantity modifier may be used to divide the desired spread quantity intoa plurality of disclosed spread quantities. Once the disclosedquantities are determined, a plurality of disclosed spread orders havingthe disclosed quantities are sequentially submitted to the market untilthe full desired spread order quantity is executed or until a predefinedcondition is detected. The price modifier is used to determine a pricelevel for each disclosed spread quantity, such that each disclosedspread order may be submitted at a different price level.

BRIEF DESCRIPTION OF THE DRAWINGS

Example embodiments are described herein with reference to the followingdrawings.

FIG. 1 illustrates an electronic trading system in which certainembodiments of the present invention may be employed;

FIG. 2 illustrates an electronic trading system in which certainembodiments of the present invention may be employed;

FIG. 3 illustrates a block diagram of a trading strategy which may beemployed with certain embodiments of the present invention;

FIG. 4 illustrates an example electronic trading system in which certainembodiments of the present invention may be employed;

FIG. 5 illustrates a set of trading screens that are used to illustratean example process of entering a modified spread order;

FIG. 6 illustrates a set of trading screens that are used to illustratefirst disclosed quantities working in the market of each leg of a spreadusing spread modifiers;

FIG. 7 illustrates an example order book interface that reflects thecurrently pending spread orders using spread modifiers;

FIG. 8 illustrates a set of trading screens that are used to illustratesecond disclosed quantities working in the market of each leg of thespread upon placing a new disclosed spread order;

FIG. 9 illustrates a set of trading screens that are used to illustratepending orders upon receiving a fill of a hedge order in one leg of thespread;

FIG. 10 illustrates an updated order book;

FIG. 11 illustrates a set of trading screens that are used to illustratepending orders upon detecting a change in market conditions in one legof the spread;

FIG. 12 illustrates a processing flow for order placement and riskallocation for a spread using spread modifiers according to one exampleembodiment;

FIG. 13 illustrates a processing flow for order placement and riskallocation for a spread not using spread modifiers according to oneexample embodiment;

FIG. 14 is a flowchart illustrating an example method for processing afill of a quoting order according to an example embodiment; and

FIG. 15 is a flowchart illustrating an example method for processing afill of a hedge order.

The foregoing summary, as well as the following detailed description,will be better understood when read in conjunction with the drawingswhich show certain embodiments of the present invention. The drawingsare for the purpose of illustrating certain embodiments, but it shouldbe understood that the present invention is not limited to thearrangements and instrumentality shown in the drawings.

DETAILED DESCRIPTION

Certain embodiments of the present invention provide one or more ordermodifiers in relation to a trading strategy having a desired price and adesired quantity. According to one example embodiment, a quantitymodifier and a price modifier are provided for a spread trading strategyhaving a desired spread price and a desired spread quantity. Morespecifically, when a spread order is submitted, the desired spreadquantity is modified based on the spread quantity modifier to determinea first disclosed desired spread quantity.

According to an example embodiment, the desired spread quantity ismodified such that only a portion of the desired spread quantity isexecuted at the desired spread price. When a complete spread unit forthe first disclosed desired spread quantity is executed, another spreadorder having a second disclosed desired spread quantity is generatedusing the spread quantity modifier. According to an example embodiment,the second disclosed desired spread quantity is submitted at a modifieddesired spread price that is determined using the predefined pricemodifier, such as an offset amount that is applied to the desired spreadprice. Once a complete spread unit for the second disclosed desiredspread quantity is achieved, additional spread orders having modifieddesired spread quantities and modified spread prices may be submitteduntil the desired spread quantity for the spread is executed or until aspecific event is detected.

As will be described in greater detail below, there are many advantagesof using orders modifiers described herein. First, when order modifiersare applied to a trading strategy, a trader's market exposure is lower,as lower order quantities are submitted to the market. Additionally,lower risk resources are allocated to execute such a trading strategy,thus, allowing the remaining risk balance to be used in relation toother trading strategies that a trader wishes to trade.

I. Example Electronic Trading System

FIG. 1 illustrates an electronic trading system 100 in which certainembodiments of the present invention may be employed. The system 100includes a client device 110, a gateway 120, and an electronic exchange130. The client device 110 is in communication with the gateway 120. Thegateway 120 is in communication with the exchange 130.

In operation, the client device 110 may be utilized by a user to sendorders to buy or sell tradeable objects at the exchange 130. The ordersare sent through the gateway 120 to the exchange 130. In addition,market data is sent from the exchange 130 through the gateway 120 to theclient device 110. The user may also utilize the client device 110 tomonitor this market data and base a decision to send an order for atradeable object on the market data.

A tradeable object is anything which can be traded with a quantityand/or a price. For example, financial products such as stocks, options,bonds, futures, currency, warrants, funds derivatives, commodities,traded events, goods, and collections and/or combinations of these maybe tradeable objects. A tradeable object may be “real” or “synthetic.” Areal tradeable object includes products that are listed by an exchange.A synthetic tradeable object includes products that are defined by theuser and are not listed by an exchange. For example, a synthetictradeable object may include a combination of real (or other synthetic)products such as a synthetic spread created by a trader utilizing aclient device 110.

The client device 110 may include one or more electronic computingplatforms such as a hand-held device, laptop, desktop computer,workstation with a single or multi-core processor, server with multipleprocessors, and/or cluster of computers, for example.

The client device 110 may include one or more trading applications. Thetrading application(s) may process market data by arranging anddisplaying the market data in trading and charting windows. Thisprocessing may be based on user preferences. The trading application(s)may include an automated trading tool such as an automated spreadtrading tool.

The client device 110 may include an electronic trading workstation, aportable trading device, an algorithmic trading or “black-box” system,an embedded trading system, and/or an automated trading tool, forexample. The client device 110 may be a computing system running a copyof X_TRADER™, an electronic trading platform provided by TradingTechnologies International, Inc. of Chicago, Ill. As another example,the client device 110 may be a computing device running the automatedtrading tool, Autospreader™, also provided by Trading TechnologiesInternational, Inc.

The client device 110 is adapted to send orders to buy or sell tradeableobjects. The client device 110 may also be adapted to cancel orders,change orders, and/or query an exchange.

The orders sent by the client device 110 may be sent at the request froma user or automatically from the computer. For example, a trader mayutilize an electronic trading workstation to place an order for aparticular tradeable object, manually providing various parameters forthe order such as an order price and/or quantity. As another example, anautomated trading tool may calculate one or more parameters for an orderand automatically send the order. In some instances, an automatedtrading tool may prepare the order to be sent but not actually send itwithout confirmation from the user.

In certain embodiments, the client device 110 includes a user interface.The user interface may include one or more display devices forpresenting a text-based or graphical interface of a trading applicationto a user. For example, the display devices may include computermonitors, hand-held device displays, projectors, and/or televisions. Theuser interface may be used by the user to specify or review parametersfor an order using a trading application. The user interface may includeone or more input devices for receiving input from a user, for example.The input devices may include a keyboard, trackball, two or three-buttonmouse, and/or touch screen. The user interface may include other devicesfor interacting with a user, and information may be aurally provided toa user through a speaker and/or received through a microphone.

In certain embodiments, the orders from the client device 110 are sentto the exchange 130 through the gateway 120. The client device 110 maycommunicate with the gateway 120 using a local area network, a wide areanetwork, a virtual private network, a T1 line, a T3 line, an ISDN line,a point-of-presence, and/or the Internet, as well as differentconnection types.

The gateway 120 is adapted to communicate with the client device 110 andthe exchange 130. The gateway 120 facilitates communication between theclient device 110 and the exchange 130. For example, the gateway 120 mayreceive orders from the client device 110 and transmit the orders to theexchange 130. As another example, the gateway 120 may receive marketdata from the exchange 130 and transmit the market data to the clientdevice 110.

In certain embodiments, the gateway 120 performs processing on datacommunicated between the client device 110 and the exchange 130. Forexample, the gateway 120 may process an order received from the clientdevice 110 into a data format acceptable by the exchange 130. Similarly,the gateway 120 may transform market data in an exchange-specific formatreceived from the exchange 130 into a format understood by the clientdevice 110. The processing of the gateway 120 may also include trackingorders from the client device 110 and updating the status of the orderbased on fill confirmations received from the exchange 130. As anotherexample, the gateway 120 may coalesce market data from the exchange 130and provide it to the client device 120.

In certain embodiments, the gateway 120 provides services other thanprocessing data communicated between the client device 110 and theexchange 130. For example, the gateway 120 may provide risk processing.

The gateway 120 may include one or more electronic computing platformssuch as a hand-held device, laptop, desktop computer, workstation with asingle or multi-core processor, server with multiple processors, and/orcluster of computers.

The gateway 120 may include one or more gateway applications. Thegateway application(s) may, for example, handle order processing andmarket data processing. This processing may be based on userpreferences.

In certain embodiments, the gateway 120 communicates with the exchange130 using a local area network, a wide area network, a virtual privatenetwork, a T1 line, a T3 line, an ISDN line, a point-of-presence, and/orthe Internet, or other connection types.

The exchange 130 is adapted to match orders to buy and sell tradeableobjects. The tradeable objects may be listed for trading by the exchange130. The orders may include orders received from the client device 110,for example. Orders may be received from the client device 110 throughthe gateway 120. In addition, the orders may be received from otherdevices in communication with the exchange 130. That is, typically theexchange 130 will be in communication with a variety of other clientdevices (which may be similar to client device 110) that also provideorders to be matched.

The exchange 130 is adapted to provide market data. The market data maybe provided to the client device 110 through the gateway 120. The marketdata may include data that represents the inside market, for example.The inside market is the lowest sell price (also referred to as the“best ask”) and the highest buy price (also referred to as the “bestbid”) at a particular point in time. The market data may also includemarket depth. Market depth refers to the quantities available at theinside market and may also refer to quantities available at other pricesaway from the inside market. Thus, the inside market may be consideredthe first level of market depth. One tick away from the inside marketmay be considered the second level of market depth, for example. Incertain embodiments, market depth is provided for all price levels. Incertain embodiments, market depth is provided for less than all pricelevels. For example, market depth may be provided only for the firstfive price levels on either side of the inside market. The market datamay also include information such as the last traded price (LTP), thelast traded quantity (LTQ), and order fill information.

In certain embodiments, the system 100 includes more than one clientdevice 110. For example, multiple client devices similar to the clientdevice 110, discussed above, may be in communication with the gateway120 to send orders to the exchange 130.

In certain embodiments, the system 100 includes more than one gateway120. Multiple gateways similar to the gateway 120, discussed above, maybe in communication with the client device 110 and the exchange 130.Such an arrangement may be used to provide redundancy should one gateway120 fail, for example.

In certain embodiments, the system 100 includes more than one exchange130. The gateway 120 may be in communication with multiple exchangessimilar to the exchange 130, discussed above. Such an arrangement mayallow the client device 110 to trade at more than one exchange throughthe gateway 120, for example. Alternatively, multiple gateways could beused, with each gateway assigned to a specific exchange.

In certain embodiments, the client device 110 includes one or morecomputing devices or processing components. In other words, thefunctionality of the client device 110 may be performed by more than onecomputing device. For example, one computing device may generate ordersto be sent to the exchange 130 while another computing device mayprovide a graphical user interface to a trader. In certain embodiments,the gateway 120 includes one or more computing devices or processingcomponents. In other words, the functionality of the gateway 120 may beperformed by more than one computing device. In certain embodiments, theexchange 130 includes one or more computing devices or processingcomponents. In other words, the functionality of the exchange 130 may beperformed by more than one computing device.

In certain embodiments, the gateway 120 is part of the client device110, and the components of the gateway 120 may be part of the samecomputing platform as the client device 110. As another example, thefunctionality of the gateway 120 may be performed by components of theclient device 110. In certain embodiments, the gateway 120 is notpresent. Such an arrangement may occur when the client device 110 doesnot need to utilize the gateway 120 to communicate with the exchange130, such as when the client device 110 has been adapted to communicatedirectly with the exchange 130.

In certain embodiments, the gateway 120 is physically located at thesame site as the client device 110. In certain embodiments, the gateway120 is physically located at the same site as the exchange 130. Incertain embodiments, the client device 110 is physically located at thesame site as the exchange 130. In certain embodiments, the gateway 120is physically located at a site separate from both the client device 110and the exchange 130.

While not shown for the sake of clarity, in certain embodiments, thesystem 100 may include other devices that are specific to thecommunications architecture such as middleware, firewalls, hubs,switches, routers, exchange-specific communication equipment, modems,security managers, and/or encryption/decryption devices.

FIG. 2 illustrates an electronic trading system 200 in which certainembodiments of the present invention may be employed. The system 200includes one or more client devices 210, one or more gateways 220, andone or more electronic exchanges 230. The client devices 210 are incommunication with one or more of the gateways 220. Each gateway 220 isin communication with a corresponding exchange 230.

One or more of the client devices 210 may be similar to the clientdevice 110, discussed above, for example. One or more of the gateways220 may be similar to the gateway 120, discussed above, for example. Oneor more of the exchanges 230 may be similar to the exchange 130,discussed above, for example.

In operation, a client device 210 may be utilized by a user to sendorders to buy or sell tradeable objects listed at different exchanges230. The orders are sent through one or more of the gateways 220 to oneor more of the exchanges 230. In addition, market data is sent from theexchanges 230 through the gateways 220 to one or more of the clientdevices 210. The user may also utilize a client device 210 to monitorthis market data and base a decision to send an order for a tradeableobject on the market data.

In certain embodiments, a client device 210 is in communication with oneof the gateways 220. In certain embodiments, a client device 210 is incommunication with more than one of the exchanges 230.

In certain embodiments, a gateway 220 is in communication with one ofthe exchanges 230. In certain embodiments, a gateway 220 is incommunication with more than one of the exchanges 230.

In certain embodiments, a client device 210 is adapted to communicatedirectly with one or more of the exchanges 230 and does not utilize agateway 220.

The components, elements, and/or functionality of the systems 100 and/or200 discussed above may be implemented alone or in combination invarious forms in hardware, firmware, and/or as a set of instructions insoftware, for example. Certain embodiments may be provided as a set ofinstructions residing on a computer-readable medium, such as a memory,hard disk, CD-ROM, DVD, and/or EPROM, for execution on a general purposecomputer or other processing device.

II. Strategy Trading

As mentioned above, in addition to trading a single tradeable object byitself, a trader may trade more than one tradeable object according to atrading strategy. One common trading strategy is a spread. Trading aspread, or “spread trading,” attempts to capitalize on changes ormovements in the relationships between the tradeable object in thetrading strategy, for example.

A trader may utilize an automated trading tool to trade according to atrading strategy. For example, the automated trading tool may beAutospreader™ provided by Trading Technologies International, Inc. ofChicago, Ill.

A trading strategy defines a relationship between two or more tradeableobjects to be traded. Each tradeable object being traded as part of atrading strategy may be referred to as a leg or outright market of thetrading strategy.

When the trading strategy is to be bought, the definition for thetrading strategy specifies which tradeable object corresponding to eachleg should be bought or sold. Similarly, when the trading strategy is tobe sold, the definition specifies which tradeable objects correspondingto each leg should be bought or sold. For example, a trading strategymay be defined such that buying the trading strategy involves buying oneunit of a first tradeable object for leg A and selling one unit of asecond tradeable object for leg B. Selling the trading strategytypically involves performing the opposite actions for each leg.

In addition, the definition for the trading strategy may specify aspread ratio associated with each leg of the trading strategy. Thespread ratio may also be referred to as an order size for the leg. Thespread ratio indicates the quantity of each leg in relation to the otherlegs. For example, a trading strategy may be defined such that buyingthe trading strategy involves buying 2 units of a first tradeable objectfor leg A and selling 3 units of a second tradeable object for leg B.The sign of the spread ratio may be used to indicate whether the leg isto be bought (the spread ratio is positive) or sold (the spread ratio isnegative) when buying the trading strategy. In the example above, thespread ratio associated with leg A would be “2” and the spread ratioassociated with leg B would be “−3.”

In some instances, the spread ratio may be implied or implicit. Forexample, the spread ratio for a leg of a trading strategy may not beexplicitly specified, but rather implied or defaulted to be “1” or “−1.”

Additionally, the definition for the trading strategy may specify amultiplier associated with each leg of the trading strategy. Themultiplier is used to adjust the price of the particular leg fordetermining the price of the spread. The multiplier for each leg may bethe same as the spread ratio. For example, in the example above, themultiplier associated with leg A may be “2” and the multiplierassociated with leg B may be “−3,” both of which match the correspondingspread ratio for each leg. Alternatively, the multiplier associated withone or more legs may be different than the corresponding spread ratiosfor those legs. For example, the values for the multipliers may beselected to convert the prices for the legs into a common currency.

FIG. 3 illustrates a block diagram of a trading strategy 310 which maybe employed by certain embodiments of the present invention. The tradingstrategy 310 includes “N” legs 320. The trading strategy 310 defines therelationship between the tradeable objects 322 for each of the legs 320using the spread ratios 324 and multipliers 326 associated with each ofthe legs 320.

Once defined, the tradeable objects 322 in the trading strategy 310 maythen be traded together according to the defined relationship. Forexample, assume that the trading strategy 310 is a spread with two legs320. Leg 1 is for tradeable object A and Leg 2 is for tradeable objectB.

In addition, assume that the spread ratios 324 and multipliers 326associated with Legs 1 and 2 are “1” and “−1,” respectively. That is,the spread 310 is defined such that when the spread 310 is bought, 1unit of tradeable object A is bought (positive spread ratio, samedirection as the spread) and 1 unit of tradeable object B is sold(negative spread ratio, opposite direction of the spread). As mentionedabove, typically in spread trading the opposite of the definitionapplies. That is, when the definition for the spread 310 is such thatwhen the spread 310 is sold, 1 unit of tradeable object A is sold(positive spread ratio, same direction as the spread) and 1 unit oftradeable object B is bought (negative spread ratio, opposite directionof the spread).

The price for the trading strategy 310 is determined based on thedefinition. In particular, the price for the trading strategy 310 istypically the sum of price of the tradeable object 322 multiplied by themultiplier 326 for each of the legs 320 of the trading strategy 310.This is illustrated in Equation 1:

Strategy Price=Σ_(i=1) ^(N)Mult(i)*Price(i)  Eq. 1

Mult(i) is the multiplier associated with leg i and Price(i) is theprice for the tradeable object for leg i. The price for a tradingstrategy may be affected by price tick rounding and/or pay-up ticks.However, both of these implementation details are beyond the scope ofthis discussion and are well-known in the art.

The discussion above applies whether the example spread is real orsynthetic. Recall that, as discussed above, a real spread would belisted at an exchange, such as exchange 130 and/or 230, as tradeableproduct. In contrast, a synthetic spread would not be listed as aproduct at an exchange, but rather the various legs of the spread aretraded at one or more exchanges. For the purposes of the followingdiscussion, the trading strategy 310 is discussed as a synthetic tradingstrategy. However, similar techniques to those discussed below may alsobe applied when a real spread is being traded.

Continuing the example from above, if a trader believes that tradeableobject A typically has a price 10 greater than tradeable object B, thenthe trader may want to buy the spread whenever the difference in pricebetween tradeable objects A and B is less than 10 and sell the spreadwhenever the difference is greater than 10. As an example, assume thattradeable object A is at a price of 45 and tradeable object B is at aprice of 40. The current spread price, using Equation 1, would then be(1)(45)+(−1)(40)=5, which is less than the typical spread of 10. Thus,the trader may buy 1 unit of the spread, which results in buying 1 unitof tradeable object A at a price of 45 and selling 1 unit of tradeableobject B at 40. At some later time, the typical price difference may berestored and the price of tradeable object A is 42 and the price oftradeable object B is 32. At this point, the price of the spread is now10. If the trader sells 1 unit of the spread to close out his position(that is, sells 1 unit of tradeable object A and buys 1 unit oftradeable object B), he has made a profit on the total transaction. Inparticular, while the trader bought tradeable object A at a price of 45and sold at 42, losing 3, the trader sold tradeable object B at a priceof 40 and bought at 32, for a profit of 8. Thus, the trader made 5 onthe buying and selling of the spread.

The above example assumes that there is sufficient liquidity andstability that the tradeable objects can be bought and sold at themarket price at approximately the desired times. This allows the traderto achieve the desired price for the spread 310. However, moregenerally, a trader determines a desired price at which to buy or sell aparticular trading strategy. Then, an automated trading tool, forexample, attempts to achieve that desired price by buying and sellingthe legs at appropriate prices. For example, when a trader enters anorder to buy or sell the trading strategy 310 at a desired price, theautomated trading tool may automatically place an order (also referredto as quoting an order) for one of the tradeable objects 322 of thetrading strategy 310 to achieve the desired price for the tradingstrategy (also referred to as a desired strategy price, desired spreadprice, and/or a target price). The leg for which the order is placed isreferred to as the quoting leg. The other leg is referred to as a leanleg and/or a hedge leg. The price that the quoting leg is quoted at maybe based on the best price that an order could be filled at in the hedgeleg. The best price is typically the best bid price when selling and thebest ask price when buying. The best price in the hedge leg is alsoknown as the leaned on price, lean price, or lean level. As the leanedon price changes, the price for the order in the quoting leg may alsochange in order to maintain the desired strategy price. It should beunderstood that the leaned on price could also be set to a price otherthan the inside market price. When the quoting leg is filled, theautomated trading tool may then submit an order in the hedge leg tocomplete the strategy. This order may be referred to as an offsetting orhedging order and is typically quoted at the leaned on price. If theorder at the leaned on price is not filled (or filled sufficiently toachieve the desired strategy price), then the trader is said to be“legged up” because the trader has not achieved the desired strategyrelationship according to the trading strategy definition.

Also, depending on the trading strategy, the price of a quoted leg maybe based on less than all of the other legs, for example. As anotherexample, the order parameters of an order in a quoted leg may lean onother types of market conditions in the other legs such as the lasttraded price (LTP), the last traded quantity (LTQ), a theoretical value,multiple quantities such as quantities closer to the inside market, orsome other reference point.

In addition to having a single quoting leg, as discussed above, atrading strategy may be quoted in multiple (or even all) legs. In suchsituations, each quoted leg still leans on the other legs. When one ofthe quoted legs is filled, the orders in the other quoted legs aretypically cancelled and then appropriate hedge orders are placed basedon the leaned on prices that the filled leg was based on.

A trading strategy with more than two legs is known as a multi-leggedstrategy or a multi-legged spread. In a multi-legged strategy, multiplesets of hedge prices can be chosen from to maintain the definedrelationship of the trading strategy for a particular quoted leg.

III. Spread Order Modifiers

Certain embodiments of the present invention provide order modifiers inrelation to a trading strategy, such as a spread, having a desiredspread price and a desired order quantity. While the discussion belowfocuses on applying one or more modifiers to a spread trading strategy,it is understood that the disclosed principles could be applied todifferent types of trading strategies as well.

According to an example embodiment, the order modifiers include aquantity modifier and a price modifier that are applied to a desiredorder quantity and a desired price defined for a spread. The quantityand price modifiers may take many different formats, and could include apercentage value, a fraction, and/or a constant value that are used tomodify the desired order quantity and the desired spread price,respectively. The quantity and price modifiers could also be determinedusing preset formulas. According to an example embodiment, the quantitymodifier divides the desired order quantity for the spread to determinea plurality of desired order quantities (referred to hereinafter as“disclosed quantities”), such that only a portion of the desired spreadorder quantity is submitted, or disclosed, to the market at a time untilthe full desired spread order quantity is executed. Then, the pricemodifier determines a price level for each disclosed quantity of thespread order, such that each disclosed quantity for the spread order maybe submitted at a different price level. It should be understood thattwo or more disclosed spread quantities could be submitted at the sameprice level, while each of the remaining disclosed spread quantitiesexecuted for the spread could be submitted at different price levels.

According to an example embodiment, a two-leg spread may be quoting asingle leg. In such an embodiment, when a first disclosed spread isdetermined, i.e., a first disclosed quantity and a first disclosedspread price are determined for the first disclosed spread, the firstleg of the spread may be quoted based on the first disclosed spreadquantity and the first disclosed price and further based on marketconditions in the other leg of the spread. In such an embodiment, asecond disclosed spread may be submitted upon detecting a predeterminedtrigger. According to an example embodiment, the predetermined triggermay be detected upon receiving a fill of a hedge order that is submittedwhen the quoted leg is filled, or in other words, when the firstdisclosed spread is fully executed. Alternatively, the predeterminedtrigger could be detected prior to submitting the hedge or beforedetecting a fill of the submitted hedge order. Different embodiments arepossible as well for detecting the trigger.

According to another example embodiment, two legs of a two-leg spreadmay be quoted at the same time. In such an embodiment, when a firstdisclosed spread is determined, the first leg and the second leg of thespread may be quoted based on the disclosed spread quantity and price,and further based on a spread definition. For example, when the firstleg is filled, a hedge order may be submitted to hedge the fill of thequoted leg. When the hedge order is sent, the second disclosed spreadmay be submitted, and the second leg order of the spread may bere-priced based on the second disclosed spread price. Additionally, thequantity of the second leg order may be changed based on the seconddisclosed quantity. According to one example embodiment, when the hedgeorder is filled, a new order may be submitted for the first leg of thespread based on the second disclosed spread.

The process of submitting subsequent disclosed spread may be repeateduntil a full desired spread quantity is submitted, or until a predefinedcondition is detected. The predefined condition may be time-based, suchas a specific time that triggers termination of the spread strategy, ora market related event, such as detecting a predetermined conditionbased on market data or other data, such as news data. For example, atrader may wish to cancel all trading strategies right before a certainnumber, such as the unemployment number, is released. It should beunderstood that different embodiments are possible as well. While theexample embodiment describes re-pricing the existing quoted leg orderupon sending the hedge order, it should be understood that the quotedleg order could also be re-priced prior to submitting the hedge order,or after the hedge order is filled.

A. Example System Configurations

FIG. 4 illustrates an example electronic trading system 400 in whichcertain embodiments described herein may be employed. The system 400includes a client device 402, a gateway 404, an exchange 406, and aspread engine automation component 408 that includes a spread modifierapplication 410 and a risk application 412. According to this example,the client device 402 is in communication with the gateway 404. Thegateway 404 is in communication with the exchange 406.

In the illustrated example, the spread engine automation component 408may be an automated spread trading application such as the one describedin the U.S. Pat. No. 7,243,083, the contents of which are fullyincorporated herein by reference. According to an example embodiment,spread orders placed via the client device 402 are processed usingspread modifiers by the spread modifier application 410 and are riskchecked by the risk application 412 according to the techniquesdescribed herein.

In an example embodiment, the spread engine automation component 408 maybe located at the client device 402. Alternatively, the spread engineautomation component 408 could be located at a server. Further,according to yet another example embodiment, some components of thespread engine automation 408 may be distributed between the clientdevice 402 and a server that is in communication with the gateway 404and the client device 402, such that the client 402 could perform spreadmodification, while the server could perform a risk check, for example.In yet another embodiment, the client 402 and the server may also beconfigured to share responsibility to perform a risk check or to applyspread modifiers to spread orders. Different embodiments are possible aswell, such as allocating certain or all functions of spread modifierapplication 410 and the risk application 412 to the gateway 404.

According to an example embodiment, the client device 402 may include auser interface that enables a user to define spread modifiers, such as aquantity modifier and a spread price modifier. For example, whendefining spread parameters, a spread configuration window may include afield that allows a user to define a spread price offset, such as avalue of “0,” “1,” or “−1,” for example. Additionally, as explainedabove, the quantity modifier may be defined as a single disclosedquantity value, that is a fraction of the desired spread quantity.Alternatively, a user could enter formulas that could be used tocalculate a disclosed spread price and a disclosed quantity for eachreload spread order. The spread modifiers specified by the user may thenbe used by the spread modifier application 410 to modify the spreadparameters, as will be discussed in greater detail below.

Additionally, the spread modifier application 410 could be configured toprovide different modified spread types that are preconfigured withcertain modifier values. In such an embodiment, a user could select aspecific modified spread type to trade, and the spread modifierapplication 410 may retrieve the settings associated with the selectedspread type and apply the settings to determine a disclosed spreadquantity and a disclosed price for each reload order of the modifiedspread.

The risk application 412 may perform risk management to determine if atrading strategy is approved based on the preset risk parameters. Therisk application 412 may notify the client device 402 and the spreadengine automation 408 whether a certain trading strategy can be used.

B. Example Implementation

According to an example embodiment, a quantity modifier may be definedas a single numerical value that is lower than a desired spread orderquantity. In such an embodiment, a portion of the desired spread orderquantity is disclosed to the market at a time, as a disclosed spreadorder, and a new disclosed spread order is submitted when the firstdisclosed spread quantity is executed. According to an exampleembodiment, the disclosed spread order is submitted a number of timesuntil the desired spread quantity is executed or until the spread iscanceled. For example, if a desired spread quantity is “5,” the quantitymodifier may be set to “1” to define a disclosed order quantity for eachof five disclosed spread orders. The disclosed spread orders may beconsecutively submitted to the market until the desired spread quantityis filled.

According to an example embodiment, when the first disclosed quantitycorresponding to the first disclosed spread order is executed, a seconddisclosed spread order is submitted. The second disclosed spread orderhas a new disclosed spread quantity. According to the example embodimentprovided above, with the quantity modifier set to “1,” the seconddisclosed quantity, as well as the third, fourth, and fifth disclosedquantities, may be set to “1.” However, it should be understood that thesecond disclosed order quantity, as well as the consecutive disclosedquantities, could be different than the first disclosed order quantity,thus, resulting in a different number of disclosed spread orders(different than “5” orders in the example above) being executed in themarket until the desired spread order quantity is executed.

Additionally, as the quantity modifier is applied to determine a newdisclosed quantity for each disclosed spread order, the price modifiermay be applied to a desired spread price to determine a disclosed spreadprice for each disclosed spread order. According to an exampleembodiment, the price modifier may be defined as an offset that isapplied to the desired spread price. However, it should be understoodthat the price modifier may be defined as a percentage that is appliedto the desired spread price to determine a modified desired spread pricefor each consecutive disclosed spread order. Different embodiments arepossible as well and may produce similar results.

In the embodiment where the price modifier is defined as a singleoffset, the offset value could be applied to the desired spread price ofthe last disclosed spread order. According to one example embodiment,the first disclosed spread order may be submitted at the desired spreadprice, and the offset may be applied to each subsequent disclosed spreadorder. Alternatively, the defined offset may be applied to the desiredspread price to determine a disclosed spread price for the firstdisclosed spread order. The offset value could be positive or negative.When the offset value is positive, the next disclosed spread order maybe placed “x” number of ticks away from the last disclosed spread pricein the direction away from the market. When the offset value isnegative, the next disclosed spread order may be placed “x” number ofticks away from the last disclosed spread price in the direction towardthe market. If the offset value is “0,” the next disclosed spread ordermay be placed at the same disclosed desired spread price as thepreviously disclosed spread order.

Table 1 illustrates an example set of price levels using the priceoffsets of “−1,” “0,” and “+1” for a buy spread order having a desiredspread quantity of “5,” a desired spread price of “1,” and a quantitymodifier of “1.” According to the example illustrated in Table 1, thefirst disclosed spread order has a disclosed spread price of “1” that isequal to the desired spread price.

TABLE 1 −1 Offset 0 Offset 1 Offset Order 1 1.0 1.0 1.0 Order 2 2.0 1.00.0 Order 3 3.0 1.0 −1.0 Order 4 4.0 1.0 −2.0 Order 5 5.0 1.0 −3.0

According to the example provided in relation to Table 1, with theoffset set to “1,” the first disclosed buy spread order (“Order 1”) hasa first disclosed spread price of “1” that is equal to the desiredspread price. In other words, according to the example embodiment inTable 1, the offset is not applied to the first disclosed spread order.However, in another embodiment, the offset could be applied to the firstdisclosed spread order as well. Once the first disclosed buy spreadorder is executed, a second disclosed buy spread order (“Order 2”)having a disclosed quantity of “1” is submitted at a second disclosedspread price of “0.0.” The price of the second disclosed buy spreadorder is determined by applying the offset of “1” to the first disclosedspread price of “1.0”. As explained earlier, when the offset value ispositive, the next disclosed spread order is placed “x” number of ticksaway from the last disclosed spread price in the direction away from themarket, where “x” is the offset value. Thus, applying the offset of “1”to the last disclosed spread price of “1.0,” the second disclosed spreadprice is set to “0.0.” When the second disclosed buy spread order isexecuted, a third disclosed buy spread order having a disclosed quantityof “1” is submitted at a third disclosed spread price of “−1.0.” Thethird disclosed spread price is determined by applying the offset of “1”to the second disclosed spread price of “0.0.” The fourth and fifthdisclosed buy spread orders are subsequently submitted at the disclosedspread prices of “−2.0” and “−3.0,” respectively.

Table 2 illustrates an example set of price levels using the priceoffsets of “−1,” “0,” and “+1” in relation to a sell spread order havinga desired spread quantity of “5,” a desired spread price of “1,” and aquantity modifier of “1.” According to the example provided in relationto Table 2, a disclosed quantity of each of the five disclosed sellspread orders is “1.” Additionally, similarly to the example provided inTable 1, the offset is not applied to the price of the first disclosedsell spread order, and the price is set to the desired spread price of“1.”

TABLE 2 −1 Offset 0 Offset 1 Offset Order 1 1.0 1.0 1.0 Order 2 0.0 1.02.0 Order 3 −1.0 1.0 3.0 Order 4 −2.0 1.0 4.0 Order 5 −3.0 1.0 5.0

According to the example provided in relation to Table 2 with the offsetset to “1,” the first disclosed spread sell order having a disclosedquantity of “1” is submitted at a first disclosed spread price of “1”that is equal to the desired spread price. Alternatively, as explainedearlier, the first disclosed spread price could be determined byapplying the offset to the desired spread price. Once the firstdisclosed sell spread order is executed, a second disclosed sell spreadorder having a disclosed quantity of “1” is submitted at a seconddisclosed spread price of “2.0.” Similarly to the embodiment illustratedin relation to Table 1, the second disclosed spread price of “2.0” isdetermined by applying the offset of “1” to the disclosed spread priceof the preceding order. As explained earlier, when the offset value ispositive, the next disclosed spread order is placed “x” number of ticksaway from the last disclosed spread price in the direction away from themarket, where “x” is the offset value. When the second disclosed sellspread order is executed, a third disclosed sell spread order having adisclosed spread quantity of “1” is submitted at a third disclosedspread price of “3.0.” The third disclosed spread price of “3.0” isdetermined by applying the offset of “1.0” to the second disclosedspread price of “2.0.” The disclosed order quantities and the disclosedspread prices for the fourth and fifth orders may be determined in thesimilar manner and are shown in Table 2.

While the examples provided in relation to Tables 1 and 2 illustrate asingle offset that is applied to a disclosed desired spread price of apreviously disclosed order, it should be understood that differentembodiments are possible as well. For example, multiple offsets could bedefined and applied to a desired spread price, such as the first offsetis “1,” the second offset is “2,” etc. Also, the offsets could bedefined such that a difference between two consecutive disclosed spreadprices is more than one tick. Different embodiments are possible aswell.

According to the example embodiments, once the disclosed spread quantityand the disclosed spread price are determined, one or more legs of thespread may be quoted based on the modified spread parameters and thespread settings. As explained in the preceding sections, the prices andquantities of the quoted orders are determined using the disclosedspread quantity, the disclosed spread price, as well as other spreadparameters, such as a spread ratio and a multiplier, for example.

FIGS. 5-11 illustrate a set of trading interfaces that may be used toenter modified spread orders and monitor the processing of the orderaccording to one example embodiment. More information related to theillustrated trading interfaces can be found in the U.S. Pat. No.6,772,132, the contents of which are fully incorporated herein byreference.

FIG. 5 illustrates a set of trading interfaces that can be used to entera modified spread order according to an example embodiment. Morespecifically, a trading screen 502 illustrates current market conditions(prices and quantities) for a spread comprising two legs: FESX Jun 09and FESX Sep 09, the market conditions of which are illustrated viatrading screens 504 and 506. According to an example embodiment, thetrading screen 502 may be used to configure a modified spread order.More specifically, the trading screen includes a reload (“RLD”) button508 that can be selected to configure a modified spread order. Once theRLD button 508 is selected, the button may be highlighted and quantityfields 510 and 512 may be displayed so that a trader can enter a totalspread quantity and a disclosed quantity. An offset field 510 is alsoprovided to enter an offset value that can be used in relation tomodified spread orders. The trading screen 500 also enables a trader todefine queue holder orders to be used in relation to each leg of thespread, as shown at 512. It should be understood that a separateinterface could also be activated to allow a trader to define spreadmodifiers and/or queue holder orders. The use of queue holders will bedescribed in greater detail below, and the example embodiments providedin relation to FIGS. 5-11 will assume that queue holders are not used.

FIG. 6 illustrates a set of trading screens 600-606 that show firstdisclosed quantities working in the legs of the spread. According to theexample illustrated in relation to the trading screen 600, a buy 5:3spread order having a desired spread quantity of “2” and a disclosedspread quantity of “1,” as shown at 606, and an offset of “1,” as shownat 608, is entered at a desired spread price of “0,” as shown at 610.

According to an example embodiment, the first disclosed spread having adisclosed quantity of “1” is entered at the price of “0.” As shown at602 and 604 both legs of the spread are quoted, with the first leg orderhaving a quantity of “5,” as shown at 610, and the second leg having aquantity of “3,” as shown at 614. The quantities for the leg orders aredetermined based on the disclosed spread quantity of “1” and the spreadratio of “5:3.” The leg orders 612 and 614 are quoted at prices of“12.0” and “14.0,” and the prices are determined based on the desiredspread price of “0” and the lean prices of each market.

FIG. 7 illustrates an example order book interface 700 reflecting thecurrently pending leg orders for the spread. As shown in the order bookinterface 700, a 5-lot quoting order and a 10-lot position reserve orderare added for FESX Jun09. The 10-lot position reserve order, as will beexplained in greater detail below, covers the risk for a possible hedgeorder and a remaining undisclosed quantity. Thus, the 10-lot positionreserve order, in this example, includes a 5-lot hedge order and a 5-lotremaining undisclosed quantity for FESX Jun09. Then, for FESX Sep09, a3-lot quoting order and a 6-lot position reserve order are shown in theorder book 700. The 6-lot position reserve for FESX Sep09 includes a3-lot hedge order and a 3-lot remaining undisclosed quantity.

FIG. 8 illustrates a set of trading screens 800-804 upon placing asecond disclosed spread order having a disclosed spread quantity of “1”and a disclosed spread price of “−1.” The new disclosed spread quantityis determined based on the disclosed quantity of “1,” and the disclosedspread price is determined by applying the preset offset of “1” to thepreviously disclosed spread price of “0.” More specifically, it isassumed that the 5-lot order for FESX Jun09 was filled and that a 3-lothedge order was sent at the price of “12” for FESX Sep09, as shown at808, prior to submitting the new disclosed spread order. As shown in thetrading screen 800, a graphical indicator 806 illustrates a newdisclosed spread order (“W1”) at the new disclosed spread price of “−1.”

As mentioned earlier, according to an example embodiment, when more thanone leg is quoted for a spread, and one of the quoting legs is filled, ahedge order is sent, and the unfilled quoting orders may be re-pricedbased on the new disclosed spread price. Then, a new quoting order forthe filled leg may be submitted when the corresponding hedge order isfilled. Thus, when the new disclosed spread is submitted, the 3-lotquoting order for FESX Sep09 is re-priced to “15.0,” as shown at 810,based on the new disclosed spread price of “−1” and the leaned on priceof “14.0” corresponding to the best ask of FESX Jun09. As explainedabove, rather than re-pricing the quoted order upon placing the hedgeorder, the quoted order could be re-priced prior to submitting the hedgeorder or after the hedge order is filled.

FIG. 9 illustrates a set of trading screens 900-904 upon receiving afill of the hedge order in FESX Sep09. More specifically, as shown inthe screen 902, a new quoting order 906 is sent in FESX Jun09 at theprice of “11.0” leaning on “12.0” of FESX Sep09. As mentioned inrelation to FIG. 8, the other leg is also quoted, as shown at 908.

FIG. 10 illustrates an updated order book 1000. More specifically, uponsubmitting a new quoting order for FESX Jun09, the position reserve ofFESX Jun09 is reduced to “5.” The order book 1000 also shows an updatedposition reserve of “3” for FESX Sep09. According to one exampleembodiment, the position reserve for FESX Sep 09 may be updated once thehedge order for FESX Sep09 is sent.

FIG. 11 illustrates a set of trading screens 1100-1104 upon detecting achange in the market conditions in one leg of the spread. Morespecifically, as shown in the trading screen 1104, the best bid pricechanged to “13.0” in the market of FESX Sep09. Thus, upon detecting thechange, the buy order of FESX Jun09 is re-quoted to “12.0,” as shown at1106, to reflect the change in the lean price. When one of the remainingquoting orders is filled, a new hedge order will be sent, and the otherquoted order may be pulled from the market, as this is the lastdisclosed spread quantity.

C. Pre-Trade Risk Management

As mentioned earlier, the existing pre-trade risk management systemsthat are used in relation to spread trading strategies allocate enoughrisk balance to cover all possible hedges. For example, in relation to a10-lot 5:3 spread trading strategy, with both legs being quoted, thepre-trade risk management system would allocate the position of “50” forthe quoting order of leg A, and “50” for a position reserve order of legA (a possible hedge order), thus allocating the risk position of “100”for leg A alone. Similarly, the pre-trade risk management system wouldallocate the position of “30” for the quoting order of leg B, and “30”for a position reserve order of leg B, thus allocating the risk positionof “60” for leg B.

In the example embodiments that disclose a partial spread quantity untila desired spread quantity is filled, the pre-trade risk management ismodified such that the risk management system only allocates enough riskto cover the orders that are in the market. For example, in relation tothe above 10-lot, 5:3 spread example, with the disclosed quantity set to“1,” and both legs being quoted, the quantity of “5” would be quoted forleg A and the quantity of “3” would be quoted for leg B. In thisexample, the risk management system would allocate a risk position of“5” for the order quantity being currently quoted in the market for legA. Additionally, a position reserve, also referred to as “a positionreserve quantity,” would be reserved for leg A. According to an exampleembodiment, a position reserve for a leg includes a hedge quantity thatis required to hedge an order quantity being quoted in another leg, anda remaining order quantity to be quantity in the leg. Thus, the positionreserve for leg A is set to “50,” with “5” of “50” being reserved tohedge the order quantity of “3” that is currently quoted in leg B, and“45” of “50” being reserved for execution of the remaining quantity inleg A of the spread. Thus, according to the modified pre-trade riskmanagement, the pre-trade risk system would allocate a total riskposition of “55” for leg A, as compared to “100” if the full quantity of“50” was quoted for leg A and if the full quantity of “30” was quotedfor leg B.

Similarly, a risk position allocated to leg B is also lower, as the riskposition allocated to leg B is “33.” The risk position of “33” includesa risk position of “3” allocated to an order being quoted in leg B, anda position reserve of “30.” The position reserve of “30” includes aposition of “3” being held to hedge the order of “5” that is quoted inleg A, and “27” being reserved for execution of the remaining quantityin leg B. Thus, the total risk position of “33” is allocated for leg B.Once again, the allocated risk position in the modified risk managementsystem is lower than “60” that would have been allocated for leg B inthe above example that involved quoting the quantity of “30” in leg B.

According to an example embodiment, the modified risk management systemmay update the risk position being reserved for a leg of a spread when adisclosed spread quantity is executed and a new disclosed quantityspread order is placed, rather than when a quoting order is filled.Because a new disclosed quantity for the spread is not submitted to themarket until the currently pending disclosed spread quantity is filled,the trader's risk will be covered with a minimal risk position taken tocover the exposure in the market. In such an embodiment, when the finaldisclosed spread quantity is working in the market, the risk positionreserved for a leg order is equal to a quantity that will be sent tohedge the order being quoted in the other leg of the spread.

The risk position being held for a leg of a spread may be determinedusing a definition, such as illustrated in Equation 2:

$\begin{matrix}{{{Leg}_{x}{PosResQ}} = {{{Leg}_{x}{Ratio} \times \left( {{SpreadQty} - {SpreadDisclosedQty}} \right)} + {{ForEachOtherQuotingLeg}\; \left( {\begin{pmatrix}{{Leg}_{x}{Ratio} \times} \\{SpreadDisclosedQty}\end{pmatrix} \left. \quad{\times \left( {1 + {OtherLegQHQty}} \right)} \right)} \right.}}} & {{Eq}.\mspace{14mu} 2}\end{matrix}$

“Leg_(x)Ratio” is the leg ratio, or a number of orders that will beplaced on that leg for one spread unit, “SpreadQty” is a desired spreadquantity, “Spread DisclosedQty” is a disclosed spread quantity, and“OtherLegQHQty” is a quantity pending for each queue holder order (theuse of queue holder orders will be described in later sections). Then,the second part of the equation (2) starting with,“ForEachOtherQuotingLeg,” determines the total hedge order quantity thatmay be needed for the spread order. More specifically,“ForEachOtherQuotingLeg” refers to other legs of the spread that arequoting and which would possibly cause a hedge order to be sent inLeg_(x). For example, if three legs are being quoted, and the currentleg (Leg_(x)) is not being quoted, if all three quoted legs are filled,3 hedges would be sent on the current leg (Leg_(x)).

According to the spread example described above, with the 10-lot, 5:3spread having a disclosed quantity of “1,” and no queue holder orders,the position reserve quantity for Leg A may be calculated as shown inEquation 3:

Leg_(A)PosRes=5×(10−1)+(5×1)×1=45+5=50  Eq.3

Similarly, the position reserve quantity for Leg B may be calculated asshown in Equation 4:

Leg_(B)PosRes=3×(10−1)+(3×1)×1=27+3=30  Eq.4

Now, assuming that both orders have two queue holder orders, theposition reserve quantity for Leg A may be calculated as shown inEquation 5, and the position reserve quantity for Leg B may becalculated as shown in Equation 6:

Leg_(A)PosRes=5×(10−1)+(5×1)×(1+2)=45+15=60  Eq.5

Leg_(B)PosRes=3×(10−1)+3×1)×(1+2)=27+9=36  Eq.6

FIGS. 12 and 13 illustrate processing flows 1200 and 1300 for orderplacement and risk allocation for a modified spread and a standardspread, respectively. More specifically, FIG. 12 illustrates orderplacement and risk allocation for a 3-lot, 5:3 spread using spreadmodifiers, with a disclosed spread quantity of “1,” and both legs beingquoted. Then, FIG. 13 illustrates risk allocation for a standard 3-lot,5:3 spread, with both legs being quoted to achieve the full 3-lotspread.

Referring to FIG. 12, as shown at 1202, a 5-lot quantity (5-lot Q) and a3-lot quantity (3-lot Q) are quoted in Leg A and Leg B, respectively,with “5” being the risk associated with the quoted order of Leg A, and“3” being the risk associated with the quoted order of Leg B. Thedisclosed quantities of “5” and “3” for each leg are determined based onthe spread ratio and a quantity modifier, i.e., the disclosed spreadquantity of “1.”

As shown at 1202, the position reserve (“PR”) risk for Leg A is set to“15” (with “5” being the risk allocated to cover a hedge order for LegB, and “10” being the risk allocated to cover the remaining quantity tobe filled for Leg A). Similarly, as shown in relation to Leg B, the PRrisk is set to 9 (with “3” being the risk allocated to cover a hedgeorder for Leg A, and “6” being the risk allocated to cover the remainingquantity to be filled for Leg B). While not specifically shown in FIG.12, it should be understood that the prices at which both legs arequoted are determined based on a disclosed spread price of the firstdisclosed spread order, and the market conditions in each leg, asexplained and shown above.

At 1204, it is assumed that the quoted order of Leg A is filled. Whenone of the quoted leg orders is filled, a hedge order in the other leg(here Leg B) is sent to the market. As shown at 1206 in FIG. 12, a 3-lothedge order (“3-lot H”) is sent for Leg B. According to one exampleembodiment, when a fill is detected in one of the legs of the spread,the quoting orders pending in the other legs of the spread are notdeleted if there is a spread quantity remaining to be filled. Thus, the3-lot quoting order (3-lot Q) for Leg B remains in the market and isre-priced based on the second disclosed spread price. According to anexample embodiment, the quoting order for Leg B may be re-priced whenthe hedge order is sent. While the example does not illustrate partialfills, it should be understood that when a partial fill is detected inrelation Leg A, the other quoting order of Leg B is not re-priced.Rather, the quantity of the other quoted order is reduced.

As shown at 1206, the PR risk for Leg B is updated to “6” when the 3-lotH is sent for Leg B. The updated amount reflects the quantity that wasfilled for the quoted order in Leg A. Also, as shown at 1206, the PRrisk for Leg A remains the same, i.e., “15,” as no additional disclosedquoting orders were placed in Leg A.

At 1208, the first disclosed spread quantity is detected (“Spread Fill1”) when the S-lot H order for Leg B is filled. At 1210, a new order forLeg A is submitted (“5-lot Q”), and the PR risk for Leg A is updated to“10,” with the quantity of “5” allocated for a possible hedge of Leg Band “5” allocated for the remaining quantity to be quoted in Leg A. The3-lot order is already quoted for Leg B based on the new disclosedspread price, and the quoted Leg B order was re-priced after submittingthe hedge order. It should be understood that the prices for the ordersquoted for Legs A and B are determined based on a new disclosed spreadprice. As mentioned earlier, the new disclosed spread price could be thesame or different than the previously disclosed spread price, dependingon the spread price modifier(s) defined for the spread strategy.

When the quoting order of Leg A is filled, as shown at 1212, anotherhedge order is sent for Leg B, as shown at 1214. The position reservefor Leg B is also updated to “3.” When the hedge order for Leg B isfilled, as shown at 1216, thus, resulting in the full execution of thesecond disclosed spread order, a new quoting order having a quantity of“5” is placed for Leg A, and the position reserve of Leg A is updated to“5,” as shown at 1218. Leg B is quoted as well, and the position reservefor Leg B remains at “3.” It should be understood that the quotingorders on Leg A and Leg B are quoted at prices that are determined basedon a disclosed spread price of the reload spread order, as well as thecurrent market conditions in each of the legs of the spread.Additionally, it should be understood that each quoted order may bere-priced based on changing market conditions to achieve the disclosedspread price.

When the last quoting order of Leg A is filled, as shown at 1220, thequoting order and the position reserve for Leg B are deleted, and ahedge order for Leg B is sent to the market, as shown at 1222. Theposition reserve for Leg A remains at “5” to cover a potential hedgefrom the quoting order on Leg B. The 5-lot PR remains in the marketuntil the delete of Leg B quoting order is confirmed. At 1224, theposition reserve for Leg A is deleted, and at 1226, the hedge order ofLeg B is filled, thus, completing the spread processing, according toone example embodiment.

For comparison, FIG. 13 illustrates risk allocation for the same 3-lot,5:3 spread that does not use spread modifiers described above.

As shown at 1302, with both legs being quoted and having the quotedquantities of “15” and “9,” respectively, the risk position allocated toeach leg of the spread is “30” and “18,” respectively. Referring back toFIG. 12, as shown at 1202, the risk allocated to each leg of themodified spread was “20” and “12” for Leg A and Leg B, respectively.

As shown at 1312 in FIG. 13, when a partial fill of “5” is detected forthe spread, the risk allocated to Leg A is “20,” and the risk allocatedto Leg B is “12,” as compared to “15” and “9” shown at 510 in FIG. 5.Steps 604-608 illustrate the intermediate steps of receiving the partialfill in Leg A, updating a quoted order for Leg B, sending a hedge orderfor Leg B, and receiving a fill in relation to the submitted hedgeorder.

At 1314, another partial fill of “5” in the quoted Leg A is detected.When the hedge order is filled in Leg B, the risk allocated to thespread is “10” for Leg A and “6” for Leg B, as shown at 1322. When thefinal partial fill is detected for Leg A, as shown at 1324, a 3-lothedge order is submitted in Leg B. Once the hedge of Leg B is filled,the spread is executed, as shown at 1330.

Comparing FIGS. 12 and 13, it can be seen that using the partialdisclosed spread embodiments, a trader's risk exposure is lower. Morespecifically, as shown in relation to FIG. 12, only partial quantitiesof “5” and “3” are in the market at any given time, as compared to thequantities of “15” and “9,” as shown in FIG. 13. Additionally, thepossible overfill amount is lower when using the partial disclosedspread quantities.

D. Queue Holder Orders

The modified spread order concepts described above could be used incombination with queue holder orders. As described in the precedingsections, when a disclosed spread order is executed, a new disclosedspread quantity is generated and a new order for a leg of the spread issubmitted to the market. In such an embodiment, when a new order for aleg of the spread is submitted to the market, it is placed at the end ofthe order queue corresponding to a price at which the leg is quoted.

According to one example embodiment, one or more additional queue holderorders may be submitted in relation to each leg quoting order at priceseither below or above the price calculated for each quoting leg. When aquoted leg order is to be re-priced, and there is a pending queue holderorder at a new quoted price, the queue holder order may be used as thequoted leg order. Thus, one advantage of using queue holder orders isthat a re-priced quoting order of the spread may have a better queueposition if one of the existing queue holder orders is at the newlyquoted price of the leg order. The prices of the queue holder orders atwhich the queue holder orders are quoted may change as the price of thequoting leg order changes, with some queue holders being deleted and oneor more new queue holder orders being added to maintain a desired numberof queue holders in the market for each leg of the spread. Moreinformation related to submitting and processing queue holder orders canbe found in the U.S. patent application Ser. No. 11/241,168, entitled“System and Method for Order Placement in an Electronic TradingEnvironment,” the contents of which are fully incorporated herein byreference.

Typically, when a quoting leg of the spread is filled, the correspondingqueue holder orders are deleted. According to one example embodiment,when queue holder orders are used in relation to a modified spreadstrategy, rather than deleting the queue holder orders every time adisclosed spread quantity is executed, the queue holder orders aremaintained in the market and remain attached to the modified spreadstrategy until the final disclosed quantity for the spread is executed.

According to one example embodiment, N orders may be submitted for eachleg being quoted for a spread, with N−1 being the queue holder orders.If the quoted order is a buy order, N−1 queue holder orders may besubmitted below the price of the quoted buy order. If the quoted orderis a sell order, N−1 queue holder orders may be placed above the priceof the quoted sell order. According to one example embodiment, theprices of N−1 queue holder orders placed above or below the price of thequoted order may be consecutive prices. Alternatively, the prices maynot be consecutive, with some price gaps being used between twoconsecutive queue holder orders, or between the quoting leg order andthe first queue holder order.

Table 3 illustrates one example embodiment of using queue holder ordersin relation to one of the legs of a spread strategy using a spreadquantity modifier, such as a disclosed spread quantity described above.Additionally, the queue holder example of Table 3 assumes that a pricemodifier is not used, or in other words, that no offset is being appliedto the next disclosed price of the spread order.

TABLE 3 Submit a Original Post “Quoting Post “Hedge Disclosed Q OrdersOrder1” Fill Order” Fill Order Quoted Filled New Quoted Ord 1 Ord2 QH1QH1 QH1 QH1 QH2 QH2 QH2 QH2 QH3 QH3 QH3 QH3 QH4 QH4 QH4 QH4

According to the example illustrated in Table 3, the first quoted order“Quoted Ord 1” may be a buy quoting order pending in one of the legs ofthe spread. When the first quoted order is submitted, four queue holderorders (“QH1-QH4”) may be submitted at four consecutive prices below thequoted buy price. Then, the first quoted order is filled, as shown inthe second column of Table 3, but the queue holder orders QH1-QH4 remainpending in the market, as there is a next disclosed spread quantity tobe submitted. As explained above, when the quoting order is filled, ahedge order in one or more other legs of the spread is submitted. Whenthe hedge order gets filled, once again, the queue holder orders QH1-QH4remain pending in the market in the first leg of the spread. When a newdisclosed quantity order is generated for the spread, a new quoted order(“New Quoted Ord2”) is submitted in the leg. Assuming that the pricemodifier is set to “0,” and there are no changes in the market of thesecond leg of the spread, the new disclosed spread order may besubmitted at the same price level as the previously disclosed spreadorder quantity. Assuming that the New Quoted Ord2 is submitted at thesame price level as the filled order, the queue holder orders would alsoremain pending at the same price levels, as shown in column 4 of Table3.

As mentioned earlier, when a price level of a quoting leg order changesbased on the changes in the leaned on price(s), the quoting leg order aswell as the corresponding queue holder orders may be re-priced. Forexample, re-pricing of the queue holder orders may involve canceling onethe pending queue holder orders, such as the highest priced queue holderorder, and placing a new queue holder order at a price lower than thelowest price of the pending queue holder. The methods for re-pricingqueue holder orders are described in the U.S. application Ser. No.11/241,168 cited above and incorporated herein by reference.Additionally, while Table 3 illustrates using queue holder orders inrelation to only one leg of the spread, it should be understood thatqueue holder orders could be used in relation to all or some of the legsof the spread using the modifiers described herein.

As mentioned earlier, when queue holder orders are used in relation to aleg of a spread, the queue holder orders are not cancelled until a finaldisclosed spread quantity is filled. Thus, a trader may take advantageof a more favorable queue position maintained by the queue holder orderswhen a new disclosed spread quantity is submitted for execution.

Table 4 illustrates one example embodiment for using queue holder ordersin relation to a leg of a spread strategy that uses price modifiers andquantity modifiers described above. In other words, the example of Table5 assumes that the spread strategy uses a disclosed quantity and a priceoffset to determine a price and a quantity of each disclosed spreadorder. Once again, the example illustrates the use of queue holderorders in relation to one of the legs of the spread. However, asexplained above, queue holder orders could be used in relation to alllegs being quoted for the spread strategy.

TABLE 4 Submit a Original Post “Quoting Post “Hedge Disclosed Q OrdersOrder1” Fill Order” Fill at Offset = 1 Quoted Filled Ord 1 QH1 QH1 QH1Quoted Order = QH1 QH2 QH2 QH2 QH2 QH3 QH3 QH3 QH3 QH4 QH4 QH4 QH4 NewQH5

Referring to the first column of Table 4, the first quoted order “QuotedOrd 1” may be a buy quoting order pending in a leg of a spread. When thefirst quoted buy order is submitted, four queue holder orders(“QH1-QH2”) may be submitted at four consecutive prices below the quotedbuy price. When the first quoted order is filled, as shown in the secondcolumn of Table 4, the queue holder orders remain pending in the marketif there is a subsequent disclosed spread quantity to be submitted tothe market. As explained above, when the quoting order is filled, ahedge order may be submitted in one or more legs of the spread. When thehedge orders are filled, the queue holder orders remain pending in themarket. Subsequently, when a new disclosed spread quantity is determinedfor the spread, a new quoted order (“New Quoted Order”) is generated forthe leg of the spread based on the new disclosed spread price and marketconditions of the leaned on legs. Assuming that a new quoted order is atthe price of the first queue holder order (“QH1”), the queue holderorder (“QH1”) may be used for the newly quoted order, as shown in thefourth column of Table 4. Then, to maintain four queue holder orders inthe market, a new queue holder order (“New QH5”) is placed at a pricelevel below the N-th queue holder order. In the example illustrated inTable 4, the new queue holder order is placed one tick below the fourthqueue holder order (“QH4”).

It should be understood that with a different offset being applied tothe next disclosed spread quantity, the next leg order may be quoted atthe price of the second queue holder order (“QH2”), for example. In suchan embodiment, “QH1” would be re-priced below the price of the N-thqueue holder (here “QH4”), and “QH2” could be used for the new quotedorder. Additionally, a new queue holder order would be added to maintainfour queue holder orders pending in the leg of the spread.

Table 5 illustrates one example embodiment for using queue holder ordersin relation to one leg of a spread strategy that uses the pricemodifiers and the quantity modifiers embodiments described above. Theexample of Table 5 assumes that the spread strategy uses a disclosedquantity and a price offset of “2” to be applied to each disclosedspread quantity. Once again, the example illustrates using queue holderorders in relation to one leg of the spread. However, as explainedabove, queue holder orders could be used in relation to all legs beingquoted for the spread strategy.

TABLE 5 First Second Original Apply Hedge Apply Hedge Orders Fill Offset= 2 Filled Offset = 2 Filled Quoted Filled Ord 1 QH1 QH1 Filled QH2 QH2QH2 QH2 QH2 QH3 QH3 QH3 QH3 QH3 QH4 QH4 QH4 QH4 QH4 QH4 QH4 QH4 QH5 RQH5 QH5 QH5 QH5 QH5 QH6 QH6 QH6 QH7 QH7 QH7 QH8

In the example provided in relation to Table 5, it is assumed that thetwo leading orders are filled in the leg that is quoted, with the systembeing configured to process one order at a time. According to oneexample embodiment, when a fill message is received for the first quotedorder (“Quoted Ord 1”), as shown in the second column of Table 5, ahedge order is sent. It should be understood that more than one hedgeorder could be sent for a spread trading strategy that includes morethan two tradeable objects. Since the offset is set to “2,” the systemattempts to re-quote “QH1” to be price below the N-th queue holder order(here “QH4”). However, as mentioned above, the quoted order and thefirst queue holder order were filled. Thus, when the system attempts tore-quote the first queue holder order “QH1,” the re-quote of the orderis rejected, as shown in the third column of Table 5 at “QH5 R.”

When the system receives a fill message for the first queue holder order“QH1,” the system may send a second hedge order for “QH1.” When thefirst hedge is filled, as shown at the fourth column of Table 5, thesystem adds a new queue holder order “QH5.” According to the exampleillustrated in Table 5, it is assumed that based on the new disclosedspread price that was determined with the offset of “2,” the pendingorders “QH2” and “QH3” are re-quoted below the current “N-th” price ofthe N-the queue holder order. As shown in the sixth column of Table 5,“QH2” and “QH3” are re-quoted, such that “QH4”-“QH7” are quoted in theleg of the spread. When the second hedge order is filled, as shown inthe sixth column, a new order is placed “QH8,” as shown in the eighthcolumn of Table 5.

E. Example Quoting Fill and Hedge Fill Processing

As mentioned earlier, when a quoting order fill is received, one or morehedge orders may be sent. According to one example embodiment, thesystem may process quoting orders and hedge orders differently. Thus,processing of the quoting orders and hedge orders will be illustrated intwo different flow diagrams.

FIG. 14 is a flowchart 1400 illustrating a method for processing a fillof a quoting order according to an example embodiment.

At step 1402, a fill is received from an electronic exchange for anorder that was quoted in relation to a tradeable object associated witha trading strategy, such as a spread strategy. Upon receiving the fill,at step 1404, a hedge order is sent. According to one exampleembodiment, a single hedge order may be sent if a trading strategyinvolves trading two tradeable objects. However, it should be understoodthat more than one hedge order could be sent in relation to a tradingstrategy that includes more than two tradeable objects.

At step 1406, it is determined if the fill of the quoted order and thehedge order are associated with the final disclosed quantity beingprocessed in relation to the trading strategy. If so, at step 1408,various order quantities may be updated. For example, if an order fillis a partial fill, the quantities of any other quoting orders may bereduced in accordance with any hedge quantity that was sent.Additionally, other quoting orders may be deleted if a full fill isdetected in relation to the quoted order. Further, a position reservequantity may be updated for each hedged leg.

Referring back to step 1406, if it is determined that the finaldisclosed quantity is not being processed in relation to the tradingstrategy, at step 1410, it is determined if the received fill is a fullfill. If not, at step 1412, the quantity of other quoted legs, as wellas queue holder order, if used, may be reduced accordingly.Additionally, the position reserve quantities are not modified. Asmentioned earlier, according to an example embodiment, the positionreserve quantities may be modified upon placing additional disclosedquoting orders rather than when a quoting order gets filled. Then, ifthe full fill is received, at step 1414, the queue holder orders, ifused, may be maintained for any future quoted orders in the leg, andother quoted orders are also maintained in the market.

FIG. 15 is a flow diagram illustrating an example method 1500 forprocessing a fill of a hedge order.

At step 1502, a fill is received for a hedge order. At step 1504, a newquoting order is submitted at an appropriate price. The price of the newquoting order is based on a new disclosed spread price and the lean onprices.

As mentioned earlier, queue holder orders may be used in relation toquoting orders. In such an embodiment, at step 1506, it is determined ifa queue holder order was used for the new quoted order. If so, at step1508, a new queue holder order is submitted to maintain a desired numberof queue holder orders pending in the market. It should be understoodthat if the new quoting order is submitted at a price of the secondqueue holder order, more than one queue holder order could be added tomaintain the desired number of queue holder orders. At step 1510, if thequantities of orders quoted in other legs of the spread were reducedprior to receiving the fill of the hedge order, such as based on thepartial fills, etc., the quantities of other quoted orders may beadjusted based on the new disclosed spread quantity and the spreadconfiguration, such as the spread ratio. Additionally, as shown at step1510, the quoted orders in the other legs of the spread may be re-pricedaccording to the new disclosed spread price and current marketconditions of the leaned-on legs.

At step 1512, the position reserve quantities are reduced according tothe example methods described above.

One or more of the steps of the methods discussed above may beimplemented alone or in combination in various forms in hardware,firmware, and/or as a set of instructions in software, for example.Certain embodiments may be provided as a set of instructions residing ona computer-readable medium, such as a memory, hard disk, CD-ROM, DVD,and/or EPROM for execution on a general purpose computer or otherprocessing device.

Certain embodiments of the present invention may omit one or more ofthese steps and/or perform the steps in a different order than the orderlisted. For example, some steps may not be performed in certainembodiments of the present invention. As a further example, certainsteps may be performed in a different temporal order, includingsimultaneously, than listed above.

While the invention has been described with reference to certainembodiments, it will be understood by those skilled in the art thatvarious changes may be made and equivalents may be substituted withoutdeparting from the scope of the invention. In addition, manymodifications may be made to adapt a particular situation or material tothe teachings of the invention without departing from its scope.Therefore, it is intended that the invention not be limited to theparticular embodiment disclosed, but that the invention will include allembodiments falling within the scope of the appended claims.

1. (canceled)
 2. A system, comprising: a computing device, wherein thecomputing device is configured to receive a definition for a spreadorder associated with a spread trading strategy, wherein the spreadtrading strategy is between at least a first tradeable object and asecond tradeable object, and wherein the definition for the spread ordercomprises a desired spread price and a desired spread quantity, whereinthe computing device is configured to divide the spread order into aplurality of disclosed spread orders based on a price modifier appliedto the desired spread price and a quantity modifier applied to thedesired spread quantity, wherein each of the price modifier and thequantity modifier is based on any one of a preset value and a formula,wherein the plurality of disclosed spread orders comprises a firstdisclosed spread order and a second disclosed spread order, the firstdisclosed spread order being associated with a first disclosed desiredspread price determined based on the price modifier, and further beingassociated with a first disclosed spread quantity determined based onthe quantity modifier, and the second disclosed spread order beingassociated with a second disclosed desired spread price determined basedon the price modifier, and further being associated with a seconddisclosed spread quantity determined based on the quantity modifier,wherein the first disclosed desired spread price is different than thesecond disclosed desired spread price, wherein the computing device isconfigured to compute a first price and a first quantity for the firsttradeable object based on the first disclosed spread order, wherein thefirst price is computed based on the first disclosed desired spreadprice and market conditions in the second tradeable object, wherein thefirst quantity is computed based on the first disclosed spread quantityand the definition for the spread order, wherein the computing device isconfigured to send a first order to buy or sell the first quantity ofthe first tradeable object of the spread trading strategy to anelectronic exchange, wherein the first quantity of the first order issubmitted at the first price, and subsequently, wherein the computingdevice is configured to detect a first trigger to initiate the seconddisclosed spread order, and subsequently, wherein the computing deviceis configured to compute a second price and a second quantity for thefirst tradeable object based on the second disclosed spread order,wherein the second price is computed based on the second discloseddesired spread price and market conditions in the second tradeableobject, wherein the second quantity is computed based on the seconddisclosed spread quantity and the definition for the spread order, andsubsequently, wherein the computing device is configured to send asecond order to buy or sell the second quantity of the first tradeableobject of the spread trading strategy to the electronic exchange,wherein the second quantity of the second order is submitted at thesecond price.
 3. The system of claim 2, wherein to detect the firsttrigger, the computing device is further configured to detect that thefirst disclosed spread order was executed.
 4. The system of claim 2,wherein the preset value for the price modifier comprises at least oneoffset value.
 5. The system of claim 4, wherein the at least one offsetvalue is a number.
 6. The system of claim 2, wherein the preset valuefor the quantity modifier comprises a fractional value.
 7. The system ofclaim 2: wherein the computing device is further configured to compute athird price and a third quantity for the second tradeable object basedon the first disclosed spread order, wherein the third price is computedbased on the first disclosed desired spread price and market conditionsin the first tradeable object, and wherein the third quantity iscomputed based on the first disclosed spread quantity and the definitionfor the spread order, and wherein the computing device is furtherconfigured to send a third order to buy or sell the third quantity ofthe second tradeable object of the spread trading strategy, wherein thethird quantity of the third order is submitted at the third price, andwherein the third order is sent when the first order is sent.
 8. Thesystem of claim 7: wherein, upon detecting a second trigger, thecomputing device is further configured to re-price the third order basedon the second disclosed desired spread price.
 9. The system of claim 8,wherein computing device is configured to detect the second trigger upondetecting a fill of the first order and before sending a hedge order forthe second tradeable object.
 10. The system of claim 9, wherein thecomputing device is configured to detect the second trigger upondetecting a fill of the first order and after sending a hedge order forthe second tradeable object.
 11. The system of claim 9, wherein thecomputing device is configured to detect the second trigger upondetecting a fill of the first order and after detecting a fill of ahedge order that is sent for the second tradeable object.
 12. The systemof claim 2, wherein the first price and the second price are differentprices.
 13. The system of claim 2, wherein the first quantity and thesecond quantity are different quantities.
 14. The system of claim 2,wherein the first quantity and the second quantity are equal.